HIGHLIGHTS

On the way to digital collaboration

The availability of data is enabling a new era of collaboration between consumer goods manufacturers and retailers on digital initiatives. The key to finding success lies in putting advanced analytics and insights at the core of the relationship, with a combined, laser focus on understanding the customer.

According to an Accenture-commissioned study, 75 percent of consumer goods manufacturers expected improved collaboration with retailers, hoping to drive product availability and make the best use of shelf space and trade promotion funds. Unfortunately, it’s not happening at the speed at which they had hoped.

Companies that are having success are identifying and navigating around a few key obstacles first. Their focus has been primarily in resolving challenges in these six areas:

Obstacle

Collaboration oftentimes is driven by tactical, short-term goals. The retailer focuses on maximizing store profitability and category optimization, while the manufacturer’s focus is squarely on its brands.

Antidote

Retailers and manufacturers must align on broad strategic objectives and commit to a set of priorities. Doing so will shift focus from short-term gains to long-term value.

Obstacle

Inconsistencies can occur due to inaccurate data capture, inconsistent data sharing formats, idiosyncratic changes to decisions on what to share, irregular frequency of data feeds, a lack of omni-channel integration and more.

Antidote

Invest in business processes that emphasize data accuracy, technology systems with seamless interlinkages and adopting common metrics and intelligent analytics. This helps companies move away from debating the validity of the data to using the insights for mutual benefit.

Obstacle

Digital technologies and social media have reduced the information asymmetry between the retailer and the consumer, but not between retailers and manufacturers. Retailers often do not have credible demand information about new products, while manufacturers lack insight into retailer actions targeting specific customer segments. Data sharing without an insights-led approach only skews the collaboration relationship one way or the other.

Antidote

Retailers need to invest in advanced analytics that provide a level of granular insight. Manufacturers, in turn, should help retailers with new insights gleaned by combining retailer data with syndicated data.

Obstacle

While retailers collect a great deal of data about their customers, they still do not know enough about them. Most retailers have little idea of what incentives work with different customer segments, are unable to measure customer lifetime value accurately, do not know who their most valuable customers are and what interests, habits and lifestyle changes are impacting customer decisions.

Antidote

While customer acquisition is important, focusing greater energy on existing customers, retailers and manufacturers can build a sustainable growth trajectory without enduring margin compression due to excessive promotions.

Obstacle

Even where there is a strong product/market fit, in the absence of speed and urgency in aligning promotions, distribution, fulfillment and return processes, decisions are suboptimal and margins suffer.

Antidote

Manufacturers invest significantly on new product development and expect retailers to roll out the products (so they can recoup their ROI quickly). But as omni-channel strategies and technologies become the norm (i.e. click and collect), retailers are challenged with distribution. A new optimized process needs to be implemented that improves the rollout across the full market.

Obstacle

Retailers and manufacturers often do not have clear, consistent metrics to measure the performance of their digital collaboration. Traditional key performance indicators (KPIs) tend to be overly sales and volume focused. Customer centricity is not measured rigorously, and each channel tends to have KPIs that do not integrate the influence of other channels.

Antidote

KPIs should be agreed in advance when retailers and manufacturers start on the collaboration journey. And the choice of KPIs needs to balance short-term and medium-term goals with longer-term strategic commitments.

Collaboration pays offAccenture’s research indicates successful collaborators can generate 2 to 10 percent in operating margin improvements. Collaboration efforts can raise store-shelf stock rates by 5 to 8 percent, reduce inventories by an average of 10 percent and cut logistics cost by 3 to 4 percent for retailers, while yielding a 5 to 15 percent reduction in manufacturing costs and a 3 to 10 percent reduction in General & Administrative (G&A) costs for suppliers.

The benefits of digital collaboration go beyond the bottom line—retailers and manufactures can improve customer experience and shopper loyalty, re-energize their stores and brands and generate customer enthusiasm for new products, amplifying sales and market share.

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